There is an ongoing debate about whether governments should be audited by public sector auditors or whether this task should be provided by private sector auditors. We investigate how public versus private sector auditors affect audit pricing for local governments and which auditors are associated with higher audit benefits using a unique setting where audits have recently switched from private sector to public sector. In this setting, local governments in Australia, audit fees are higher when local governments are audited by public sector auditors than by private counterparts. The effect is stronger for when a public auditor reports on local governments facing high default risk, having high task complexity, and located in weak institutional environments. We further document that public auditors are associated with greater audit benefits, including more unmodified opinions, less audit delay, less earnings manipulation, lower leverage, and higher operating efficiency. Our findings show that public sector auditors cost more yet provide a higher-quality service. The study contributes to the wider issue of whether audits of private sector companies should be conducted by private sector audit firms or by an agency of the state.